Short-Seller Kerrisdale Targets Riot Crypto Miner’s ‘Flawed’ Model


Kerrisdale Capital Management LLC, known for its short-selling strategies, has set its sights on Riot Blockchain Inc., criticizing its business model as flawed in the challenging landscape of Bitcoin mining. According to Kerrisdale, investing in Bitcoin directly is a more viable option for cryptocurrency enthusiasts than purchasing miner stocks.

The report released by Kerrisdale founder Sahm Adrangi highlighted Riot’s shareholder dilution due to the company’s stock-selling practices. Additionally, Adrangi’s letters to Texas government officials raised concerns about Riot’s energy usage practices and its impact on the state’s energy laws.

Shares of Riot, based in Castle Rock, Colorado, experienced a decline of up to 8.9% following the publication of Kerrisdale’s report. The company has yet to respond to requests for comment from Bloomberg News.

Adrangi emphasized that Bitcoin mining is a highly competitive commodity business with minimal barriers to entry, particularly as new mining projects emerge globally. He argued that the current valuations of Bitcoin miners do not justify investment, especially considering the availability of low-fee exchange-traded funds for investors seeking exposure to Bitcoin.

This isn’t the first time Kerrisdale has targeted companies with exposure to cryptocurrencies. In March, the firm recommended a pair trade involving shorting MicroStrategy Inc. while taking a long Bitcoin position, a strategy that has proven successful thus far.

However, there are potential risks associated with shorting Bitcoin miners, as demonstrated by Core Scientific Inc.’s recent surge in stock price following news of long-term contracts and acquisition offers. Despite the challenges highlighted by Kerrisdale, the dynamic nature of the cryptocurrency market leaves room for miners to adapt their business models and attract investors or strategic buyers.

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